Matt likes Microsoft's marketing, which is outsourced to fairly standard advertising agencies. Its marketing is a function of cash; it has buckets to spend to get the word out. It got to use a Rolling Stones tune to promote Windows 95 (the one containing the lyrics "you make a grown man cry") simply because it had millions to spend to get the rights. This isn't some kind of inherent superiority, merely an outgrowth of its monopoly revenue stream.
The most successful element of its financial management has been sheltering its profits from taxes to the point where Microsoft critic Bill Parish no longer believes the company pays any income taxes at all. While impressive from an accounting standpoint, this is not indicative of future revenue growth. Microsoft has resorted to accounting tricks as a SUBSTITUTE for revenue growth, which has been hard to come by for some time. A mature company does not grow like a start-up forever. Microsoft has been fighting market saturation for years, and it has done so by leveraging its monopoly.
Microsoft's "financial management" has involved raising the price of its operating system from $9 a copy to $100 each (and although Windows 98 is a long way from DOS, a modern 20 gigabyte hard drive is a long way from an old 20 meg hard drive, yet sells for less money without even taking inflation into account). They can do this because customers literally had no alternative. Until recently you couldn't buy a PC from Dell, Compaq, or Gateway without also buying a copy of Windows. (Hence "Windows Refund Day.") Microsoft also broke new ground by charging people to debug their software, both with 1-900 tech support and by selling beta test versions of the product for almost as much as the final version costs. Again, this is leveraging their monopoly to squeeze more revenue from customers.
The "business strategy" that led Microsoft to victory over Apple and IBM was to let the commodity hardware fight their battles for them. Commodity products out-evolve proprietary products, and the PC hardware crushed both Apple's Macintosh and IBM's microchannel architecture. Until recently, Microsoft never faced challengers seeking to commoditize the software market, only other companies seeking to replace one monopoly with another, as Apple tried with MacOS, IBM tried with OS/2, and Sun tried with Java. Under those circumstances, the incumbent monopoly had overwhelming advantages.
One thing Matt and I do agree on is that Microsoft isn't good with technology. The company's development efforts are an incredibly inefficient waste of resources, made marginally workable by throwing insane amounts of money at them. They can't even ship their core product, the operating system, on time. You all know Windows 2000 shipped three years late, but did you know Windows 95 did as well? Microsoft called it Windows 95 because it expected to release annual upgrades, yet the next version wasn't Windows 96 or Windows 97 but Windows 98. And 98 was yet another DOS-based operating system (it still runs the OS they bought from Seattle Computer Products, good old 16-bit DOSi, under the covers), although Microsoft has promised after every single version they've released since Windows 3.1 that there will be no more DOS-based versions, that they'll make NT a viable option for everybody. Three guesses what their next consumer OS, "Windows ME," runs under the covers...
Despite their relentless repetition of the mantra of "innovation," the only product Microsoft has EVER actually innovated is "Microsoft BOB." You remember "BOB," the smiley face with sunglasses, in stores everywhere Christmas of 1995? The talking paperclip in Microsoft Word is one of the "virtual agents" from BOB. That's the ONLY innovation originating within Microsoft. I've asked people for over a year to e-mail me if they can think of another, and nobody has yet.
Their first ever product, BASIC, was an implementation of an existing public domain technology. Their breakthrough product, DOS, they bought from Seattle Computer Products. PowerPoint they bought as a start-up. Word was a copy of WordPerfect, just as Excel was a copy of Lotus 1-2-3. Their SQL database they got from Sybase. The Internet was first brought to Windows 3.1 by Trumpet Winsock, and their Web browser started with technology from Spyglass and added features copied from Netscape. Windows 2000's big advantages? Well, they say it doesn't crash as much. Oh, and Active Directory, which they copied from Novell. Microsoft's critics keep track of this sort of thing.
Microsoft has consumed many business partners in its search for growth beyond market saturation of the PC software market, but it buys products rather than people. Robert Cringely's article about the aftermath of Microsoft's acquisition of Hotmail explains why developers of purchased companies seldom choose to stay with Microsoft. The result is that the Windows software market has become a virtual wasteland. Ask yourself, are there more boxes of Windows software in stores today, or have all the software developers instead switched to designing ever more powerful websites? Even the game market has largely switched over to Sega and Nintendo, and games are very important in driving the growth of PC hardware. Who is going to buy a 700 megahertz processor to read e-mail?
Microsoft's attempts to diversify away from Windows are hampered by the way it runs everything else it acquires into a defense of its monopoly. There's no reason why Word couldn't be ported to Linux, except that Microsoft won't do it. Its monopoly is a golden albatross, making it relatively unprofitable to even think about investing in anything else. Microsoft knows what's coming, as the leaked Microsoft internal research reports dubbed the "Halloween Documents" demonstrate. But Microsoft can't do anything about it; its corporate culture locks it in. An antitrust breakup could be Microsoft's only hope, freeing up the company to think about other alternatives. But this doesn't mean the fallout from the trial won't be extremely painful in other ways.
Microsoft has never had to survive without a monopoly. It was founded on the idea of creating a monopoly. When Bill Gates and Paul Allen proposed partnering to create their first product, a BASIC interpreter for the Altair, they were already afraid they were too late. Not to sell a product, but to lock out any possible competition. Literally, those two would not have gone into business if they hadn't believed they could attain a monopoly.
IBM survived the loss of its monopoly because it had earned it in the first place. IBM may have been a little rusty, but it still had the skills that made it great in the first place. Microsoft has never had to fend for itself in that way. A truly competitive environment is simply anathema to Microsoft, but like it or not, that's what the market is demanding. And the customer is always right.
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